Watchdog probes M&S 'bid'

THE Financial Services Authority is to widen its investigation into the phantom bid for Marks & Spencer by a South African financier that sent shares to their highest level since November 2002.

Concerns have been raised about the timing of a statement last Tuesday from Cape Townbased Paulsmeier Group that it was organising a bid for the High Street giant.

The FSA is exploring whether a 'false and misleading position was created' and, if so, who was involved in the UK.

The South African statement came only hours after billionaire retail entrepreneur Philip Green announced he would not make a fresh bid for M&S, a move that could have been expected to hit the share price.

Financial Mail has now established that Green spoke to M&S chief executive Stuart Rose the week before and discussed a letter from Mark Paulsmeier, which Rose had dismissed as an approach not to be taken seriously.

Rose and Green subsequently spoke twice on Monday, first at 5.30pm, then 9.30pm, when Green revealed he would be making a public statement the next day, ruling himself out of a bid.

M&S confirmed these conversationsand added that it was early in the morning when Rose informed Paul Myners, chairman of both M&S and the Guardian Media Group, of Green's impending announcement. At 7am Green's statement was released to the Stock Exchange.

The same day, details were reported in The Guardian newspaper of Paulsmeier's plan for a 410p-a-share offer.

Later that day, M&S shares hit a high of 388p. They closed on Tuesday at 374p, their highest closing price since November 2002.

About 48m shares changed hands that day - four times the typical daily volume. But many in the City are amazed that the deal was taken seriously.

Paulsmeier, who claims to run a venture capital network in Cape Town, was quickly discredited after several firms on his lengthy list of blue-chip 'clients', such as accountancy firms PricewaterhouseCoopers and Deloitte & Touche, said they had never heard of him.

Both the Takeover Panel and the FSA contacted M&S on Tuesday for clarification. The retailer suggested that the huge share price movement was because traders who had gone short on the shares, thinking a bid approach had evaporated, suddenly needed to buy after Paulsmeier's potential interest was revealed.

By Thursday, the Takeover Panel forced Paulsmeier to admit he was not 'leading, nor contemplating making, any takeover bid'.

The FSA declared itself 'satisfied that Paulsmeier Inc had clarified its intentions towards M&S', but said it would continue to monitor the situation.